With Challenging Industry Dynamics, Tencent's Pace Of Recovery Remains Unclear To Analysts

With Challenging Industry Dynamics, Tencent's Pace Of Recovery Remains Unclear To Analysts
  • Benchmark analyst Fawne Jiang reiterated a Buy on Tencent Holding Ltd TCEHY and cut the price target to HK$345.00.
  • With China's growth outlook reset and the high level of internet penetration, he expects that the early-stage hypergrowth for Big Tech platforms in China is behind him. 
  • Jiang saw pockets of opportunities and anticipated deep-pocketed and innovative platforms will be diligently repositioning, as he had observed in Tencent's recent efforts in their overseas game expansion and SaaS initiatives. 
  • Admittedly these efforts will take time to translate into meaningful topline impact
  • In the near term, Jiang anticipates muted growth across segments, particularly in games and business services, and has lowered his FY22 and FY23 estimates. 
  • The company will continue focusing on cost savings and capital returns
  • Excluding its investment portfolio, Tencent's pace and magnitude of growth recovery remain unclear.
  • Mizuho analyst James Lee maintained a Neutral with a HK$300.00 price target.
  • OPI beat expectations due to cost controls, and the capital allocation policy remained favorable with buybacks and special dividends.
  • As anticipated, the top line was mixed due to lower activities for games and lockdown impact on Fintech, but offset by strength in advertising. 
  • The gaming business in China remained challenging due to a lack of new significant titles and a slower approval process. 
  • The company invests in international games, mini-programs for e-commerce, and business services to align with policies. 
  • He maintained his FY24 EBITDA estimates of RMB 224 billion.
  • Price Action: TCEHY shares traded higher by 5.51% at $39.06 on the last check Thursday.
  • Photo by Chris Yunker via Flickr

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